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Second homes in Hainan (II): social inequalities

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The second homes phenomenon not only increases the economic dependency to tourism and real estate sector in Hainan, but also aggravates social inequalities on the island.

In 2013, 40% of all residential real estate transactions were made by non locals. This figure reached 85% in Sanya, the island’s main resort city1. This means that few locals can now afford to buy their home in the southern coast of Hainan. Only wealthy mainlanders can do so.

The Hainanese society has a complex structure, and has long suffered from disparities; second homes may strengthen these inequalities.

Feng Chongyi and David Goodman2 note in the 90’s that the Hainanese society was divided between locals and mainlanders. With Hainan being granted the status of province in 1988, hundred thousand skilled workers flocked from mainland to the island where they were offered high positions in the local administrations and state owned companies.

The development of tourism and second homes in Hainan may deepen these divisions.

According to a study made by Wang, Wei and Li3, Sanya’s population is divided into three main groups that are the local residents (500,000 inhabitants), visitors (100,000) and non local residents  (200 000 inhabitants living in the city several weeks/months per year).

This new population does not only affect real estate prices, but also everyday product prices, this makes locals complain about inflation. The municipal government of Sanya has constantly readjusted the amount of allocation offered to its local residents.Social discontent in Hainan can lead to further tensions between locals and second home owners, and this may make the island’s image less attractive.

Another possible consequence of the second home boom in Hainan is the destruction of local cultural particularisms. With more mainlanders coming to Hainan, the island can lose its “art de vivre”. In the 90’s, one of the consequence of the massive coming of mainlanders to the Hainan was the weakening of Hainanese dialect.

Today, Hainan has for ambition to become a successful tourist destination, but can also do so by offering more than “the sea and sun package”, and so needs to promote its insular culture. And so an equilibirum needs to be found between the settling of second home owners from mainland and the preservation of local culture(s).

 

  1. “85% of Sanya’s residential properties sold to non-islanders”, Hainan government, March 13 2014. Retreived September 20, 2014 from http://en.visithainan.gov.cn/en/lynewsview_2929.htm [↩]
  2. Feng Chongyi and David, S. G. Goodman (1997), “ Hainan: communal politics and the struggle for identity”, in GOODMAN, David S. G. (ed.), China’s provinces in reform : class, community and political culture, London, New York: Routledge [↩]
  3. WANG Fei et al.(2013), “Equalization of public service facilities for tourist cities – case study of Sanya’s downtown public service facilities in the planning process”, ISOCARP [↩]

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE - Nottingham Trent University)

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Second homes in Hainan (I): reducing dependency.

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As noted in a previous post, the second home phenomenon in China is quite different from the one in Western countries. Most of them are not exactly holiday homes, but are bought for other purposes. On exception may be Hainan: the southern island is presented as a major tourist destination and so the island has attracted thousands of Mainlanders who wish to spend a few weeks per year under the sun. But second home acquisitions in Hainan are also motivated by speculation. Per consequence, this phenomenon needs be carefully scrutinized by local authorities, and more actions should be taken to reduce the local dependency to the real estate sector.

In the past, in the early years of reforms, Hainan was doomed by real estate speculation and this partly caused the economic turmoil the island experienced in the late 90’s.

Since then, the island has been recovering thanks to the development of tourism.  With tourism and the rising of Chinese middle-class, second homes have appeared in Hainan. According to Wang Xiaoxiaà in in 2006, 25,000 second homes could be found Haikou1.

In 2010 was launched an ambitious plan to transform Hainan into an international destination by 2020. This decision boosted the housing sector on the island, but for fear of overheating, the local government limited the number of acquisitions one may purchased in Hainan. In spite of these measures, the island experienced a strong increase of real estate prices, and Sanya, Hainan’s main resort city, has become the 5th most expensive Chinese city.

For the local authorities, real estate and construction have gradually become their main financial resources. For the first semester 2014, more than one third of the provincial GDP was produced by real estate, this figure reached nearly three-fourths in Sanya2.

This causes the whole economy of Hainan to be very dependent on real estate.  And the bad news is that real estate in Hainan is very volatile and speculative. Most real estate programmes do not answer local housing demands but target wealthy Mainlanders, and since the beginning of this year, sales have started to drop.

This should drive the local government of Hainan to reconsider its strategy and diversify the island’s economic activities.

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I have studied this aspect of the development of tourism in Hainan in my Ph.D. dissertation entitled “Les politiques de développement regional d’une zone périphérique chinoise, le cas de la province de Hainan (Regional development policies in a Chinese peripheral region: the case of Hainan province). This dissertation was defended on December, 18, 2014, and will soon be available online.

  1. WANG Xiaoxiao (2006), The second home phenomenon in Haikou, Master thesis, University of Waterloo, Canada. Retreived December 20, 2015 from http://etd.uwaterloo.ca/etd/x42wang2006.pdf [↩]
  2. DOI, Noriyuki (2014), ‘Chinese housing prices still sliding’, Nikkei Asian review, August, 24. Retreived September 20, 2014 from http://asia.nikkei.com/Politics-Economy/Economy/Chinese-housing-prices-still-sliding [↩]

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE - Nottingham Trent University)

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The paradox of China’ second homes

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In 2007, 82% of China’s urban population consisted of homeowners, and 11% also owned a second home.  From a European point of view, this figure is huge; for instance, there are “only” three million second homes in France.  So should we conclude that members of the Chinese middle class are more likely to buy a second home than their European counterparts? The question is whether this phenomenon reflects the same reality in China as in Western countries.   Huang Youqin and Yi Chengdong’s article1 clearly shows that the large number of second home owners in China mainly results from economic transition.

Resort construction in Haikou, Goulard SébastienCertainly, as a result of increasing incomes, some Chinese can afford a second home to spend their holidays in attractive and sunny regions and to experience of a westernized way of life. This is particularly true in the southern province of Hainan, where holiday villas have mushroomed over the last few years. Some Chinese have purchased multiple homes as profitable investments because of rising property prices. The authors note that without property tax, maintaining a second home does not require a lot of money.

According to the authors’ studies, the second home phenomenon in China is mainly the consequence of the transition from a socialist to a market-type economy.

  • Recent reforms in the housing sector have led to the privatization of public housing. Residents have been able to buy their homes for a very low price from the government or from work units (which explains the high rate of homeownership in Chinese cities). However, they have not been granted full ownership rights for their housing, only partial ones.  This means that they are not allowed to easily sell their properties on the private market.  So these residents have more financial resources (savings) to purchase another home, but find it difficult to dispose of their purchased public housing.
  • Despite the increasing marketization of the housing sector, some work units and administrations still allocate housing to their employees. Thanks to these allocations, these privileged renters can save more and can more easily afford to buy a second home.  
  • The migrants’ situation is even more paradoxical. Because of the hukou registration, rural migrants are not eligible for subsidized housing from municipalities or work units. Few of them can afford to buy apartments in cities on the private market. As a result, most of them rent their home in urban areas. Even so, more than 30% of migrants are second home owners. Rural migrants still own agricultural lands in their home province that they are not allowed to sell on the private market. They consider their second homes in their native province as a kind of insurance In case they do not succeed in integrating their new urban life.

These different situations lead to what by Western standards seems an unusual result: many second home owners rent their main home. The authors also mention that the second home issue illustrates the growing inequalities among urban residents.   They argue that this situation is not sustainable and that China will have to thoroughly reform its housing policies.

Huang and Yi offer some recommendations to the Chinese authorities. First, they call for the creation of a housing tax and sound investment opportunities for the middle class, in order to reduce real estate speculation.

They also believe that the authorities should terminate the registration system (hukou) and accord the right to sell or exchange agricultural land.

They also claim that subsidised and allocated housing fails to perform its intended function, that of assuring that the rural migrants are the first to benefit from the scheme. This policy would accelerate their integration into urban centres.

This article succeeds in pointing out a blatant inequality in Chinese cities: whereas some Chinese must confront obstacles in the search for cheap and convenient housing, others can afford a second home. However, this inequality is not entirely the result of the market economy, but also of a socialist legacy, which created different categories of residents according to their urban or rural status. A better programme of housing allocation that would give priority to poor migrants (the solution suggested by the authors) would not only reduce this inequality but also be an answer to the “urban villages” and the real estate boom Chinese cities have experienced. Thus, transferring subsidized housing from urban second home owners to migrants would reduce the housing shortage and provide solutions for related issues.  

  1. Huang, Youqin & Chengdong Yi, 2011 “Second home ownership in transitional Urban China”. Housing Studies, 26(3), pp 423-447. [↩]

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE - Nottingham Trent University)

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